Outlook for Pulpwood Supply & Demand in the Asian Pacific Rim


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Outlook for Pulpwood Supply & Demand in the Asian Pacific Rim

The Outlook for Pulpwood Supply and Demand is a paid-for multi-client service which provides subscribers with an in-depth report analysing the South East Asian market for hardwood chips.

During the past 10 years, the Asian market for hardwood chips has surged to 23 million BDMT, from just 13 million BDMT 10 years previously. The surge in demand owes to expanding pulp production, most significantly in fibre scarce China, where a number of large scale pulp lines have been installed since 2004. These large and modern pulp mills have relatively low conversion costs, but the relatively high price of importing woodchips ensures that they (and other Asian pulp mills) are amongst the highest cost pulp producers in the world. 

Although China has now overtaken Japan as the leading Asian consumer of imported hardwood chips, the dynamics of Chinese trade are somewhat different. Whilst Japanese paper companies have for many years established their own plantation areas and chipping operations in key supplying regions, the Chinese are largely dependent on third party purchases. In an effort to reduce their exposure to high fibre costs and the pulp cycle, Chinese mills are attempting to follow the Japanese model by forward integrating with paper and board production, and converting production to higher margin specialty pulps. They are also diversifying their sources of chip supply, and seeking to secure volumes on a longer term basis than before.

The rate of investment in Chinese pulp capacity has slowed, but a number of new lines (making chemical, dissolving, and high-yield pulps) are scheduled to start in the next two years, ensuring that the demand for chips will remain strong. The Japanese industry is clearly more mature, however Japanese companies are fully invested in their fibre supply chains and pulp mills provide the main source of energy to the paper industry. Japanese chip imports have remained very stable in recent years. Furthermore, Japanese demand for biomass (which may take the form of chips, pellets, or PKS) is expected to rise sharply in the coming years.


The major suppliers of hardwood chips to South East Asia include Vietnam, Australia, Thailand, Indonesia, South Africa, Brazil and Chile. To date, aggregate chip supply from these regions has been able to satisfy the rapid growth in demand over the past 10 years. However, future export availability from several key regions is increasingly uncertain owing to a combination of declining yields, changing government legislation, and the increased incidence of pest, fire and disease. Supply risks being further undermined by  the historic poor rates of return on offer through plantation management; in Australia, record harvests are not being matched by replanting, as the better economic returns on offer from cultivating other crops is incentivising large areas of the planation resource to be restored to arable farming.

Export availability may also be constrained by investment in new pulp capacity in Latin America (Chile & Uruguay), Vietnam and Laos. In Indonesia, the recent start-up of APP’s OKI Pulp & Paper Mills in Sumatra puts further strain on the region’s limited pulpwood supplies, particularly after huge areas of Indonesian plantations were lost to fire in 2015. The catastrophic impact has prompted a radical change in forest management legislation, and the Indonesian government has recently established a Peatland Restoration Agency (BRG) which has a five year plan to restore the peatland ecosystem covering 2 million hectares across Riau, Jambi, South Sumatra, Kalimantan and Papua. Given that over 50% of pulpwood plantations are on peatlands, this has already prompted significant confusion about short term harvest volumes. It seems certain to undermine pulpwood supply in the future as the major plantation owners are forced to relocate to degraded and unproductive mineral soils.

An extreme scenario could see a significant reduction in Indonesian BHKP exports, which are currently running at around 4 million t/y, and could rise to 5 million tonnes through 2018 assuming the OKI mill maintains is current operating rate.

Even if Indonesian pulp capacity is fully utilised, these wood supply issues and those affecting other countries will undoubtedly inflate production costs across the Asia Pacific region as a whole.

Scope of the report

This report provides a high level overview of some of the key factors which may determine the supply and demand of hardwood chips within South East Asia in future years. This report will provide an overview of the plantation resources and forest product industries in each of the major supplying regions, and comment on the likely wood chip export availability over the next five years. It will identify the major consumers of wood chips in each market, their sources of supply, and investment plans. It will describe wood chip price trends according to region and species and explain the influence of supply, demand, species and yield, shipping costs and terms of trade.

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